DISCLOSURE UNDER BASEL II As On 31-12-2013

Banks operating in Bangladesh are maintaining capital since 1996 on the basis of risk weighted assets in
line with the Basel Committee on Banking Supervision (BCBS) capital framework published in 1988.
Considering present complexity and diversity in the banking industry and to make the banks capital
requirement more risk sensitive. Bangladesh Bank, being the central bank of the country has decided to
adopt the Risk Based Capital Adequacy for banks in line with capital adequacy framework devised by the
BCBS popularly known as ' Basel II'. Bangladesh Bank prepared a guideline to be followed by all
scheduled banks from January 2009. These guidelines are articulated with the following areas, viz;
A) Introduction and constituents of Capital,
B) Credit Risk,
C) Market Risk,
D) Operational Risk,
E) Supervisory Review Process,
F) Supervisory Review Evaluation Process,
G) Market Discipline,
H) Reporting Formats and
I) Annexure
These guidelines will be able to make the regulatory requirements more appropriate and will also assist the
banks to follow the instructions more efficiently for smooth implementation of the Basel II framework in
the banking sector of Bangladesh.
The major highlights of the Bangladesh Bank regulations are:
a) To maintain Capital Adequacy Ratio (CAR) at a minimum of 10% of Risk weighted assets
b) To adopt the Standardized Approach for credit risk for implementing Basel -II
c) To adopt Standardized (Rule Based) Approach for market risk and Basic indicator Approach for
operational risk and to submit the returns to Bangladesh Bank on a quarterly basis.

Disclosure framework
The general qualitative disclosure requirements
For each separate risk area (e.g. credit, market, operational, banking book, interest rate risk, equity) bank
must describe their risk management objectives and policies, including:
Strategies and processes,
The structure and organization of the relevant risk management function,
The scope and nature of risk reporting and / or measurement systems,
Policies for hedging and / or mitigating risk and strategies and processes for monitoring the
continuing effectiveness of hedges / mitigates.

The following components set out in tabular form are the disclosure requirements
a) Scope of application
b) Capital structure
c) Capital adequacy
d) Credit risk
e) Equities: disclosures for banking book positions
f) Interest rate risk in the banking book (IRRBB)
g) Market risk
h) Operational risk

Scope of application
Qualitative Disclosures
a) The name of the top corporate entity in the group to which this guide lines applies Bangladesh Krishi
Bank.
b) An outline of differences on the basis of consolidation for accounting and regulatory purposes, with a
brief description of the entities within the group that are fully consolidated. Bangladesh Krishi Bank's MCR
has been arrived at on consolidation Basis
1) that are not given a deduction treatment, BKB has no subsidiary company.
2) that are neither solo nor deducted (e.g. where the investment is risk weighted)
c) Any restrictions, or other major impediments, on transfer of fund or regulatory capital within the group
Yes, there are

Quantitative Disclosures
d) The aggregate amount of capital deficiencies in all subsidiaries included in the consolidation that are not
deducted and the name(s) of such subsidiaries.

Capital Structure
Qualitative Disclosures
Summary information on the terms and conditions of the main features of all capital instruments ,
especially in the case of capital instruments eligible for inclusion in Tier 1 or in Tier 2 .
Tier -1 Capital comprises of paid up Capital, Statutory Reserve , General Reserve and Retained Earnings.
Tier-2

Capital consists of General Provision, Asset Revaluation Reserve Revaluation Reserve for
Securities, and Revaluation Reserve for Equity Instrument and Balance of Exchange Equalization
account.

Quantitative Disclosures
b) The amount of Tier-1 capital, with separate disclosure of :
(amount figure in crore Tk)
Paid up capital -------------------------------------------- 900.00
Statutory reserve ------------------------------------------23.23
General reserve ------------------------------------------ 58.81
Retained earnings -----------------------------------------(3317.71)
Minority interest in subsidiaries ------------------------ 0.00
Non -cumulative irredeemable preference shares ---- 0.00
Dividend equalization account--------------------------- 0.00
Other ( if any item approved by BB) ------------------- 0.00
c) The total amount of Tier -2 and Tier 3 capital ---- 361.10
d) Deductions from Tier -1 & II capital --------------- 2217.27
e) Total eligible capital ---------------------------------- (4552.94)

Capital Adequacy
Qualitative Disclosures
(a) A summary discussion of the bank's approach to assessing the adequacy of its capital to support current
and future activities. Since its inception in 2009 the bank has been following Standardized Approach,
Standardized (Rule Based) Approach and Basic indicator Approach for calculating capital requirement
against Credit Risk, Market Risk and Operational Risk respectively.

Quantitative Disclosures
(b) Capital requirement for Credit Risk --------------1173.99 crore Tk.
(c) Capital requirement for Market Risk --------------6.46 crore Tk.
(d) Capital requirement for Operational Risk --------30.38 crore Tk.

Credit Risk
Qualitative Disclosures
(a) The General qualitative disclosure requirements with respect to credit risk, including:
-As regards capital charge for Credit Risk, all assets in Banking Book have been risk weighted strictly
based on pre specified risk weight as determined by Bangladesh Bank as per RBCA guideline. However,
the Bank has conducted proper mapping with the grading of Bangladesh for those exposures or claims
graded by ECAI.
Definition of past due and impaired (for Accounting purposes)

 Any claim or exposure that has been overdue for 90 days or more is called past and impaired loan in
accordance with the definition given by Bangladesh Bank as per section 5(CC) of the Bank Companies
Act.1991 .
Description of approaches followed for specific and general allowances and statistical methods.
-The Bank has been following standardized approach for assessing the requirement of capital charge
against Credit Risk. The methodology used for this approach is to rate the exposures or by the ECAI
(External Credit Assessment Institution)
Discussion of the Bank's credit risk management policy.
-Based on CRMG guidelines published by Bangladesh Bank, an updated and well managed Credit Risk
Management Policy has been placed in Bangladesh Krishi Bank .
-It serves as a guide to effectively avert risks involved in lending activities of the bank.
-The Credit Risk Grading (CRG) has been in place since its introduction in 2005 and it is being used for
making proper lending decision and for administering the CRM process.
-Bangladesh Krishi Bank credit policy is based on the customers' need on their business and security,
earning capacity of recipient. the repayment ability of the business, and follows conservative approach in
valuation of collateral.
-The Credit policy of the bank is focused on the economic goal of the country and policies adopted by the
Government. It strives towards the materialization of the Government policies leading overall economic
development of the country.
-The policy stresses the need to give special attention to problem loans and to initiate appropriate action for
protecting the Banks interest on a timely basis.
-Bangladesh Krishi Bank strictly adheres to the regulatory policies, rules etc as regard to credit
management and is in compliance with regulatory requirements as stipulated by Bangladesh Bank from
time to time.
-The objective of credit risk management is to minimize the different dimension of risks associated with
credit exposures and to maintain credit risk profile of the bank within tolerable range.

Quantitative Disclosures
(b) Total gross credit risk exposures broken down by major types of credit exposure.
(amount figure in crore Tk)
Funded---------------------------------------------------16021.19
Non funded --------------------------------------------- 1206.35
Total ------------------------------------------------------17227.54

(c) Geographical distribution of exposures, broken down in significant areas by major types of credit
exposure
Balance sheet exposures
(amount figure in crore Tk)
Dhaka Division----------------------------------------------------8155.07
Chittagong Division----------------------------------------------- 3344.16
Khulna Division--------------------------------------------------- 2341.57
Barisal Division-------------------------------------------------

1354.35

Sylhet Division------------------------------------------------------826.04
Total----------------------------------------------------------------- 16021.19
Off balance sheet exposures :

(figure in Crore Tk.)

Total --------------------------------------------------------------1206.35
d) Industry type distribution of exposures, broken down by major types of credit exposure :
Industry -wise distribution of loans and advances:
(amount figure in crore Tk)
Agriculture Crop Loan ---------------------------7258.60
Fishery Loan----------------------------------------948.21
Livestock Loan------------------------------------ 900.37
Textile ( Industry & Trade)-----------------------241.55
Transport -------------------------------------------- 14.25
SME------------------------------------------------ 484.22
RMG ---------------------------------------- ------- 535.70
Leather------------------------------------------------ 17.60
Consumer Credit------------------------------------- 32.13
Trade Financing--------------------------------------3252.60
Others industries-------------------------------------1160.31
Construction ,Health & Storage---------------------658.66
Others --------------------------------------------------516.99
Total ---------------------------------------------------16021.19

Non Funded: As yet not Available

e) Residual contractual maturity breakdown of the whole portfolio broken down by major
types of credit exposure.
Funded Exposure.
(amount figure in crore Tk)
Repayable on Demand

474.52

Not more than 3 month

2074.65

More than 3 month but not more than 1 year

7108.60

More than 1 year but not more than 5 year

4405.82

More than 5 year

1957.60

Total -------------------------------------------------------- 16021.19

Non Funded : As yet not Available.
f) By major industry or counterparty type :
Amount of impaired loans and if available
past due loans, provided separately-------------------- 5022.50 crore
Specific provision ----------------------------------------675.34 crore
General provisions-------------------------------------- ---0.00
Changes for specific allowances and change
Off during the period : Not Applicable
g) Gross Non performing Assets (NPAs) ---------------------Tk 5022.50 crore
Non performing Assets (NPAs ) to Outstanding loans & advances : 0.33:1.00
Movement of Non Performing Assets (NPAs)
(amount figure in crore Tk)
Opening balance---------------------------4747.45
Additions-------------------------------------275.05
Reductions---------------------------------- 0.00
Closing balance ----------------------------5022.50

Movement of specific provisions for NPAs :

(amount figure in crore Tk)
Opening balance--------------------------------675.70
Provisions made during the period ----------0.00
Write off & Interest Remission---------------0.36
Write -back of excess provision -------------0.00
Closing balance---------------------------------675.34

Equities : Disclosures for Banking Book positions

Qualitative Disclosures
a) The general qualitative disclosure requirement with respect to equity risk including:
Differentiation between holdings on which capital gains are expected and those taken under other
objectives including for relationship and strategic reasons.
-Basically, there is no differentiation for all equity holdings are held for expected capital gain. However,
there are holdings which are kept for relationship and strategic reason apart from capital gains.
Discussion of important policies covering the valuation and accounting of equity holdings in the banking
book. This includes the accounting techniques and valuation methodologies used including key
assumptions and practices affecting valuation as well as significant changes in these practices.
-Equity holdings in the banking book are recorded in the books of accounts at cost price. In fact there is no
valuation methodology used in the bank. Provisions are made against equity holdings when there takes
place any decrease in the value of equity holdings.
Quantitative Disclosures
a) Value disclosed in the balance sheet of investments. as well as the fair value of those investments. for
quoted securities a comparison to publicly quoted share values where the share price is materially different
from fair value.
b) Capital requirements broken down by appropriate equity groupings, consistent with the banks
methodology. as well as the aggregate amounts and the type of equity investments subject to any
supervisory provisions regarding regulatory capital requirements.

Interest rate risk in the banking book (IRRBB)

Qualitative Disclosures
(a) The general qualitative disclosure requirement including the nature of IRRBB and key assumptions.
including assumptions regarding loan prepayments and behavior of non maturity deposits and frequency of
IRRBB measurement.
Interest rate risk describes how the bank would be negatively affected with the change in the interest rates
on its On- balance sheet and the Off- balance sheet exposures. The Bank uses a simple Sensitivity Analysis
as well as Duration Gap Analysis to determine its vulnerability against the adverse moment of market
variables.
Bangladesh Krishi Bank discusses the interest rate issue in its ALCO meeting on monthly basis . In
addition JBL assesses the interest rate risk using simple duration analysis as per the formula given by
Bangladesh Bank in its guidelines on Stress Testing. For change in interest rates, currently, Bangladesh
Krishi Bank is more risk sensible for its Assets comparable to its Liabilities.
The Bank is on a continuous process of re-structuring in its assets and liabilities to make a balance between
them and to bring the situation back in its favor for any change in interest rate.
Quantitative Disclosures
(b) The increase (decline) in earning or economic value ( or relevant measure used by management) for
upward and downward rate shocks according to management method for measuring IRRBB. broken down
by currency (as relevant)
The bank has been using '' Stress Testing'' based on the guideline published by Bangladesh Bank to
determine the following:
Impact on earning and Impact on Capital requirements

Market Risk
Qualitative Disclosures.
(a) Views of BOD on investment activities.
-The BOD of the Bank views the ' Market Risk' as the risk to the banks earnings and Capital due to change
in the market level of interest rates of securities, foreign exchange and equities as well as the volatilities of
those changes.
Methods used to measure Market Risk
-The Bank uses the standardized (Rule Based) approach to calculated market risk for trading book
exposures .
Market Risk Management system
-ALCO is the key tool for managing market risk. An ALCO is in place in the bank to administer the
system.
Policies and process for mitigating market risk
-The only mitigation tool that the Bank uses is the '' Marking to Market'' for mitigating market risk,
Besides, a set risk/ loss tolerance level is in place to mitigate market risk.
Quantitative Disclosures
(b) The capital requirements for
(amount figure in crore Tk)
interest rate risk Tk.

0.00

Equity position risk Tk

0.69

Foreign exchange risk Tk. 5.78

Commodity risk -

0.00